Surprisingly good jobs report sends Wall Street surging

A surprisingly positive jobs report Friday showed that employers added 165,000 positions in April and the unemployment rate fell to a four-year low of 7.5 percent, sparking a day of milestones on Wall Street as investors looked past doubts about robust hiring in the months ahead.

An advertisement in the classified section of the Boston Herald newspaper calls attention to possible employment opportunities in Walpole, Mass.
AP

A surprisingly positive jobs report Friday showed that employers added 165,000 positions in April and the unemployment rate fell to a four-year low of 7.5 percent, sparking a day of milestones on Wall Street as investors looked past doubts about robust hiring in the months ahead.

The report from the Bureau of Labor Statistics sent stocks soaring at the open, partly because it exceeded low expectations but also because it included sharp upward revisions to February and March job estimates, adding a combined 114,000 jobs to those earlier tallies.

The S&P 500, an index of the 500 leading publicly traded companies, crossed into record territory shortly after trading opened and never looked back. It finished up 16.83 points to 1,614.42.

Within the first hour of trading, the Dow Jones industrial average crossed the 15,000 barrier for the first time in its long and storied history. It bounced around there all day before closing up 142.38 points to 14,973.96, just short of the important psychological barrier for investors.

The Dow is an index of 30 large publicly traded companies. It broke the 14,000 barrier almost six years ago, in July 2007. The S&P crossed its 1,500 barrier 13 years ago.

The tech-heavy Nasdaq index rose 38.01 points Friday to 3,378.63.

Rising stock prices and gains in home prices have some Americans feeling more comfortable about their financial status for the first time in years. Good news begets good news, and Wall Street hopes it will draw more investors back into stocks.

“As the market grinds higher, we think there are a lot of investors who . . . worry that they are being left behind,” said Richard Slinn, an investment specialist for JPMorgan Private Bank, which manages investments for a wealthy clientele.

Friday’s jobs report and the revisions it contained meant the economy had some tail wind going into the across-the-board reductions in federal spending, called the budget sequester, that started taking effect March 1.

While anticipation of lower government and defense spending was blamed for sluggish economic growth of 2.5 percent from January to March, the sequester might not have had much impact yet on hiring broadly across the economy.

“The jobs report was a pleasant surprise. Job growth is slowing, but not as much as feared,” said Mark Zandi, the chief economist for forecaster Moody’s Analytics. “The decline in unemployment is also encouraging, particularly because it was driven by an increase in jobs.”

February’s estimate of 268,000 jobs was revised to 332,000, a solid number that’s sure to spark argument about the effects of the government sequester.

March estimates also were revised upward, from a dismal 88,000 to a healthier but still subpar 138,000 jobs for the month the federal budget cuts began.

“It suggests the labor market is still improving and is helping to sustain consumer spending and housing market advances. However, there is little sign in these data to suggest that a marked acceleration in monthly job creation in the months ahead is in the cards,” cautioned Scott Anderson, the chief economist for Bank of the West in San Francisco. “The lack of manufacturing jobs could signal a slowdown in service-job growth in the months ahead if the manufacturing sector continues to cool.”

Hiring in manufacturing, a big employment driver last year, was largely unchanged in April after decelerating in recent months. The sector has throttled back and may stay weak for several months.

“Part of the challenge for manufacturing is that you are seeing slow growth in terms of exports . . . at the same time we have also seen domestic sales really slow down as well,” said Chad Moutray, the chief economist for the National Association of Manufacturers.

On the plus side, manufacturing tied to the automotive and aviation sectors continues to add jobs. But hiring and output have slowed in apparel, computers and other consumer-oriented manufacturing, he said.

“I think the sequester has certainly had an impact,” said Moutray, who also thought that slowing U.S. exports to Canada and Europe explain more of the softness in hiring by manufacturers.

Retailers welcomed Friday’s strong report.

“Finally some reassuring news on jobs and the economy,” Jack Kleinhenz, the chief economist for the National Retail Federation, said in a statement. “Today’s solid employment news combined with positive March revisions may bode well for the broader economy and portend steady retail sales in April.”

There were few blemishes in Friday’s report, as it showed job growth in most sectors, with only government and construction hiring in decline. Temporary hiring, often a harbinger of future full-time positions, was up sharply for the month at almost 31,000 positions. The leading gainer was professional and business services, a category that reflects better-paying white-collar jobs.

There was slight improvement in some problem areas, such as long-term unemployment, which fell by 258,000 posts to a still-high 4.4 million. As a percentage of the unemployed, this number fell by 2.2 percentage points and now reflects 37.4 percent of all those classified as unemployed.

After shrinking for three consecutive months, the size of the labor force increased by 210,000 workers in April, suggesting it was hiring that had helped bring down the jobless rate by a tenth of a percentage point during the month. Some 11.7 million Americans were counted as unemployed in April.

There was one warning sign deep within Friday’s report, however.

“The only blemish was the outsized decline in hours worked per week. The decline was especially large in retail, leisure and hospitality, and construction. This suggests that small businesses are putting more workers into part-time jobs to avoid the impact of health care reform,” said Zandi of Moody’s Analytics.

Giving weight to that concern, the number of people who reported to the Labor Department that they were working part time but wanted full-time employment increased in April by 278,000, to 7.9 million Americans.